Unit root properties of crude oil spot and futures prices

Journal article


Maslyuk, Svetlana and Smyth, Russell. (2008) Unit root properties of crude oil spot and futures prices. Energy Policy.
AuthorsMaslyuk, Svetlana and Smyth, Russell
Abstract

In this article, we examine whether WTI and Brent crude oil spot and futures prices (at 1, 3 and 6 months to maturity) contain a unit root with one and two structural breaks, employing weekly data over the period 1991–2004. To realise this objective we employ Lagrange multiplier (LM) unit root tests with one and two endogenous structural breaks proposed by Lee and Strazicich [2003. Minimum Lagrange multiplier unit root test with two structural breaks. Review of Economics and Statistics, 85, 1082–1089; 2004. Minimum LM unit root test with one structural break. Working Paper no. 04–17, Department of Economics, Appalachian State University]. We find that each of the oil price series can be characterised as a random walk process and that the endogenous structural breaks are significant and meaningful in terms of events that have impacted on world oil markets.

KeywordsUnit root; Oil prices; Structural breaks
Year2008
JournalEnergy Policy
PublisherElsevier
Page range2591 - 2600
Research GroupSchool of Arts
Place of publicationUnited Kingdom
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